Housing Market Troubles Signal Potential Economic Slowdown

The housing market is traditionally seen as a leading economic indicator. As consumers have increasing capital, they tend to invest in their homes first.

In this sense, home sales, new builds, and home remodel numbers often signal what is happening with consumer spending before it appears in other sectors. For that reason, recent analyses by Housing Wire indicate that the market has slowed down dramatically — and that is cause for concern. Declines in new build applications and slowing remodel growth have led to a host of theories.

Numbers Don’t Lie

While it’s true that statistics don’t often lie, numbers can be manipulated. However, the decline in housing starts is particularly clear. Building permits, the necessary step for starting new builds, dropped a whopping 8.4 percent from last year. Builders are certainly seeing lowering demand. The remodeling industry is also following suit. Spending on home remodels and renewal projects dropped 10.4 percent, taking the wind out of the industry’s sails. While this could represent consumers moving to newer homes and now remodeling, with declining new build starts, it’s a bearish indicator. Declining spending in these areas fits with other indicators. The current economic increases (3.2 percent in the first quarter) were led by increased retailer inventory. While this could be a sign of growth, it may also indicate that consumers are leaving goods on the shelves.

Double Down?

The market’s indicators being what they are, housing developments indicate a risk of substantial economic recession. As consumer spending goes, so goes the economy. These statistics indicate decreasing consumer spending as well as decreasing consumer confidence. Fear in the market is likely related to the concerns associated with the Federal Reserve’s (Fed) monetary policies. As the season of rate hikes appears to be closing, the economy is teetering on the brink. There is no certainty in the market, and consumers feel it. Bitcoin’s (BTC) relative stability during the market fears has been encouraging. Apparently, the store of value (SoV) proposition that Bitcoin offers is moving investors into digital currencies, even as markets are losing stability elsewhere. While real estate is considered a fixed asset, Bitcoin also provides liquidity, an important feature when markets decline. Do you think the market is set to decline rapidly based on the housing numbers, or will these statistics just be a point of pause as the market continues its stability? Let us know your thoughts in the comments below!